STAR Market Faces First Delisting Risk Due to Annual Report Failure

Independent Directors Unanimously Vote Against, Annual Report Disclosure Reaches Deadlock

On the evening of April 28, STAR Market-listed company Zhuoran Co., Ltd. issued a highly market-sensitive announcement — a "Major Risk Warning Regarding the Expected Inability to Disclose the 2025 Annual Report Within the Statutory Deadline." The announcement revealed that because all three independent directors on the company's audit committee cast unanimous opposing votes, the 2025 annual report could not be submitted to the board of directors for further review, and the company expects it will be unable to complete annual report disclosure within the statutory deadline.

This event is extremely rare. The independent director system is an important safeguard in listed company governance, and the unanimous rejection of the annual report by all audit committee members suggests there may be serious disagreements or even major hidden risks in the company's financial information disclosure. This is also very likely to become the first case since the STAR Market's launch where delisting risk warning is triggered due to failure to disclose an annual report on time.

Delisting Risk Timeline: Delisting Warning Possible Within Four Months

Under current delisting rules, Zhuoran Co., Ltd. faces escalating risks. The specific timeline is as follows:

• After the statutory disclosure deadline expires: The company's shares will be immediately suspended from trading, with a suspension period of two months;
• If the annual report still cannot be disclosed within the two-month suspension: The company's shares will be subject to "delisting risk warning," receiving the "*ST" designation;
• If disclosure remains impossible two months after the delisting risk warning is imposed: The company will be subject to compliance-based delisting, formally entering delisting proceedings.

In other words, if Zhuoran Co., Ltd. cannot resolve the annual report disclosure issue within the coming months, the company will face a chain reaction from suspension to delisting, and investors' interests will be severely affected.

The Governance Significance Behind Independent Directors 'Drawing Their Swords'

In this incident, the collective opposing votes by the three independent directors are particularly noteworthy. For a long time, the independent director system in China's A-share market was often criticized as being merely ornamental, with independent directors typically playing the role of "rubber stamps" on the board. However, in recent years, as regulators have continuously strengthened independent directors' accountability, they have begun to genuinely exercise their supervisory and checks-and-balances functions.

The unanimous rejection by Zhuoran's audit committee demonstrates that independent directors are transitioning from "formal compliance" to "substantive performance of duties." Although this rejection directly led to the annual report failure and delisting risk, from a corporate governance perspective, independent directors decisively stepping up when they identify potential problems actually represents a form of protection for minority investors' interests — rather than allowing a potentially problematic annual report to slip through, it is better to expose risks in advance.

A 'Litmus Test' for the STAR Market's Delisting Mechanism

Since its launch in 2019, the STAR Market has been known for its more market-oriented and rule-of-law-based institutional design, and its delisting system is regarded as one of the strictest among A-share market segments. Previously, several companies on the STAR Market had been delisted or warned due to failure to meet financial benchmarks, but triggering delisting risk due to inability to disclose an annual report on time is a first.

This case will serve as a litmus test for the operational effectiveness of the STAR Market's delisting mechanism. Market observers note that annual report disclosure represents the basic baseline for listed company information transparency, and the inability to disclose on time itself indicates significant deficiencies in a company's information disclosure compliance. The STAR Market's establishment of a clear delisting pathway for such situations reflects the regulatory philosophy of "delisting all that should be delisted."

Warning Significance for Technology Companies

Zhuoran Co., Ltd.'s predicament also sounds an alarm for technology-related listed companies on the STAR Market and across the entire A-share market. Against the backdrop of intensified capital market regulation, listed companies must pay close attention to the following aspects:

1. Financial compliance: Ensure financial data is authentic, accurate, and complete, and maintain thorough communication with auditing firms;
2. Internal governance: Value the opinions of audit committees and independent directors, and resolve internal disagreements promptly within reasonable frameworks;
3. Information disclosure timeliness: Annual report disclosure is not only a legal obligation but also the foundation for maintaining market trust.

Outlook

Currently, all market participants are closely watching whether Zhuoran Co., Ltd. can complete its annual report disclosure during the suspension period. The company needs to urgently communicate and coordinate with its auditing firm and independent directors regarding disputed matters to find a solution acceptable to all parties. If disputes cannot be reconciled, the company will inevitably slide toward the abyss of delisting.

For investors holding Zhuoran shares, the most important thing right now is to closely monitor the company's subsequent announcements, assess their own risk tolerance, and make informed investment decisions. For the market as a whole, this event once again demonstrates that amid the deepening reform of the registration-based IPO system, a market ecosystem with "orderly entry and exit" is rapidly taking shape, and no listed company should rely on luck.